Recitation, as required by CPLR §2219(a), of the papers considered in the review of motion/cross-motion.Papers NumberedRespondent’s motion 1Petitioner’s cross-motion/opposition 2Respondent’s opposition/reply 3Petitioner’s reply 4DECISION/ORDER Upon the foregoing cited papers, the decision and order on this motion and cross-motion is as follows:This is respondent’s motion for summary judgment pursuant to CPLR §3212 on the (i) second affirmative defense in her verified answer dismissing the petition for failure to state the regulatory status of 650 New Jersey Avenue, Apt. 1F, Brooklyn, New York (“premises”) and declaring that same is rent stabilized and on the (ii) first and second counterclaims in her answer for rent overcharge and treble damages with entry of a money judgment representing as well as (iii) pursuant to CPLR §3126 precluding petitioner from offering any other documentary evidence not already produced pursuant to prior orders and/or discovery demands. Respondent also seeks attorneys’ fees. Petitioner cross-moves for relief pursuant to RPAPL §745 for respondent’s alleged failure to pay use & occupancy as agreed pursuant to a so-ordered stipulation. Petitioner’s cross-motion is denied in its entirety and respondent’s motion is granted in part and denied in part for the reasons stated below.Procedural HistoryPetitioner New River Realty Corp. (“petitioner”) commenced a nonpayment of rent proceeding against respondent Cynthia Morgan (“respondent”) in July 2018 by petition and notice of petition, seeking a final judgment in the amount of $8328.00 in rent arrears at $1400.00 per month in connection with her tenancy at the premises pursuant to a written lease agreement. The petition alleges that the premises are not rent stabilized by virtue of high rent vacancy deregulation. Respondent interposed a pro se answer on July 18, 2018 alleging conditions and partial payments.Respondent thereafter retained counsel who moved to amend the answer and for discovery. The court granted the motion, ordering respondent to verify, serve and file the proposed amended answer annexed to the motion and petitioner to provide discovery. Her verified amended answer contained several affirmative defenses including failure to state regulatory status, breach of warranty of habitability, and several counterclaims including rent overcharge, treble damages, a rent abatement, an order to correct, and attorneys’ fees. Respondent then filed this instant summary judgment motion and petitioner submitted its cross-motion. All responsive papers have been served, filed, and submitted. Oral argument was held.DiscussionSummary judgment is a drastic remedy that is appropriate only when proponent can establish that there are no triable issues of fact. 1540 Wallco. Inc. v. Smith, 2017 N.Y. Misc. LEXIS 43 (N.Y.City Civ. Ct. Bx. Cty. 2017)(summary judgment is a drastic remedy which should not be granted where there is any doubt as to the existence of material and triable issues of fact). A proponent of summary judgment must demonstrate that there are no material issues of fact in dispute and that he is entitled to judgment as a matter of law; the evidence must be viewed in favor of the opponent of the motion. See Kahona Beach LLC v. Santa Ana Rest. Corp., 29 Misc.3d 1210(A)(Sup.Ct. N.Y. Cty. 2010). Once a movant establishes entitlement to judgment as a matter of law, the burden shifts to opponent to show that triable issues of fact exist. See Zuckerman v. City of New York, 49 N.Y.2d 557 (1980).Respondent argues that there are no issues of fact surrounding the rent-stabilized status of the premises, While petitioner alleges that the premises are exempt from said status by virtue of high rent vacancy deregulation, respondent argues that deregulation was improper and a result of a fraudulent scheme to deregulate the premises, resulting in improper registrations thereafter. She specifically points to a vacancy increase of approximately 90 percent taken in 2002 plus additional vacancy successive, and this improper, rent increases without intervention of a new tenant.Respondent highlights the Division of Housing and Community Renewal (“DHCR”) records reflecting a vacancy increase from $568.00 to $1080.60 in 2002 and then another vacancy increase in 2003 from $1080.601 to $1297.29. The premises was registered as temporarily exempt from 2003-2005 by virtue of a lease between petitioner and JVA Houses Partnership, a not-for-profit, and as corroborated by a lease for at least a 10 month period to commence on October 2003 and to terminate in May 2005, after exercise of extension option. Rent was $1100.00 per month as per the leases and petitioner’s rent ledger.After the temporary exemption, Timothy Mingo was registered as tenant with DHCR at a legal regulated rent of $1557.51 in 2006 reflecting a 20 percent increase. His lease and petitioner’s rent ledger reveal that he was charged $1100.00 per month for 2006. Petitioner then took another 20 percent vacancy increase in 2007, registering same as $1869.02 and then again in 2008, registering the tenancy of Shymecca Parker at the legal regulated rent of $2242.82, thus exempt from rent regulation by virtue of high rent vacancy2, but did not produce Parker’s lease or proof that she was given the appropriate riders.3 Petitioner registered Parker’s tenancy with the DHCR reflecting a preference of $1067.00. The rent ledger reveals that petitioner charged Parker $1067.00 from 2007 through 2009 at which point it charged $1115.00 per month through and including September 2010. The ledger indicates that she moved into the premises on August 29, 2007. Petitioner offered no explanation for taking an additional increase in 2008 after the increase between Mingo and Parker in 2007.Petitioner’s next vacancy increase was taken in 2011, now registered as exempt, corroborated by a lease with Jean Guerline. Guerline’s initial lease was not produced but her form rent-stabilized lease renewal dated April 2, 2012 reveal the legal rent as $2570.00 but that she was charged a preference of $1100.00 per month as corroborated by petitioner’s rent ledgers for this period. She signed another renewal lease in June 12, 2014 with a “new rent” of $1131.38 for 2 years but a preference of $1050.00. Both rents were charged at different times as reflected on petitioner’s rent ledger. Respondent Cynthia Morgan then took occupancy in 2017 pursuant to a lease (not rent stabilized) for $1400.00 per month. Again, petitioner registered the premises with DHCR as “exempt”. Throughout this entire period, petitioner’s breakdowns show consistent charges and rent payments, although sporadic, at approximately $1100.00 per month since 2003 until commencement of respondent’s tenancy in 2017 at which time the rent ledger and lease stated a monthly rent of $1400.00.Based on the above facts, respondent argues that the high-rent vacancy deregulation in 2008 was improper as based on inflated, and incorrect, rent amounts. She argues that this was part of a fraudulent scheme to deregulate the premises requiring this court to look beyond the four years set forth in CPLR §213-a regulating overcharge complaints. She concludes that, therefore, the premises remains rent stabilized and that her rent is above the regulated legal rent. As a result, she alleges that she has been wilfully overcharged and is entitled to collect treble damages for such overcharge.In order to reach this argument, respondent must establish that this court may look beyond the 4 year period set forth in CPLR §213-a, which provides that the court shall examine the rental history to the base date 4 years prior to the overcharge complaint. This would limit respondent’s challenge to her current rent of $1400.00 per month to 2014, at which time the premises was registered as exempt due to deregulation. The court may, however, look beyond the 4 year period if (1) respondent can establish that it must do so in order to ascertain whether it was properly deregulated, (2) if respondent establishes substantial indicia of a landlord’s fraudulent scheme to deregulate the premises, and (3) to review rental history of the housing accommodation immediately preceding preferential rents to the present when the legal rent is listed in the lease but preferential rent is charged4. See Rent Stabilization Code §2521.2©.CPLR §213-a does not preclude the court from looking beyond the base date in order to address a tenant’s challenge to deregulation. Gersten v. 56 7th Ave. LLC, 88 A.D.3d 189 (1st Dept. 2011)(courts have uniformly held that landlords must prove the change in an apartment’s status from rent-stabilized to unregulated even beyond the four-year statute of limitations for rent overcharge claims). See also 24-03 41st LLC v. Bao, 2017 NYLJ LEXIS 465 (Civ. Ct. Queens Cty. 2017) and East West Renovating Co. v. DHCR, 16 A.D.3d 166 (1st Dept. 2005)(consideration of events beyond the four-year period is permissible if done not for the purpose of calculating an overcharge but rather to determine whether an apartment if regulated). The 90 percent vacancy increase in 2001 plus successive vacancy increases with no intervening tenant in 2002, then the high rent vacancy increase in 2008 without a new tenant, and then deregulated the premises, supports finding that the rent amount upon which Petitioner de-regulated the premises in 2008 was incorrect and therefore such deregulation was improper. Petitioner’s submissions offer no explanation as to these increases.Courts have also authorized looking back beyond the four years prior to the overcharge claim if the standard base date rent is tainted by fraudulent conduct on the part of the landlord in order to determine whether the base date rent is lawful. In re: Grimm v. DHCR, 15 N.Y.3d 358 (2010) While an unsubstantiated increase alone may be insufficient for this purpose, a combination of factors such as those presented in this case warrant examination of the rental history beyond four years from the base date. The court relies on the unexplained vacancy increases in 2002 and 2008, at 90 percent and 20 percent, respectively, along with petitioner’s charging consecutive, uninterrupted preferential rents since at least 2001, in finding that its review of the rent history in this case is not limited by CPLR §213-a.In support of its conclusion that CPLR §213-a does not limit examination of the rent history to 4 years from the date of the overcharge counterclaim, the court also considers RSC §2522.5(c) which requires the landlord to annex to the lease a rider promulgated or approved by DHCR containing a detailed description of how the rent was adjusted from the prior legal rent with a notice of the prior legal regulated rent. The record is devoid of copies of the required vacancy riders annexed to the leases annexed to the papers. This, in combination with a rent registration history that is inconsistent with the lease history, supports a finding that there exists a question of whether fraud was perpetrated so as to warrant looking back farther into the rent history than allowed under CPLR §213-a. See 700 Bklyn Realty LLC v. Forsythe, 2016 NYLJ LEXIS 3664 (Civ. Ct. Kings Cty. 2016).In addition, RSC §2521.2(c) authorizes an examination of a rental history immediately prior to preferential rent even if beyond 4years prior, specifically stating that “where the amount of the legal regulated rent is set forth either in a vacancy lease or renewal lease where a preferential rent is charged, the owner shall be required to maintain, and submit where required to be DHCR, the rental history of the housing accommodation immediately preceding such preferential rent to the present which may be prior to the four-year period preceding the filing of a complaint.” In 2001, the tenant at that time was charged a preference of $500.00 per month while the legal registered rent was $568.005. Every tenant registered thereafter paid a preferential rent as corroborated by the leases provided by petitioner as well as the rent ledgers even after petitioner registered the premises as exempt. Therefore, review of the rent history prior to these preferences is permissible. See Rios v. Rosado, 2016 NYLJ LEXIS 4895 (Civ. Ct. Kings Cty. 2016).Based on the above, respondent’s motion pursuant to CPLR §3212 for summary judgment determination on her second affirmative defense that the premises are rent-stabilized and dismissing the non-payment case on this basis is granted. The apartment was improperly removed from rent stabilization by virtue of a high rent vacancy deregulation based on unexplained and improper rent increases. The petition is dismissed with prejudice and, as such, is entitled to an award of reasonable attorneys’ fees after a hearing as this court finds that she is a a statutory tenancy to which RPL §234 applies and is the prevailing party.The court denies respondent’s motion for summary judgment on her first and second counterclaims seeking overcharge and related treble-damages as triable issues of fact surround the appropriate method to set the rent and therefore the court cannot determine, at this stage, whether respondent was overcharged at all. Specifically, questions of fact surround the correct method of determining the correct legal regulated rent. Whether she was overcharged depends on the correct legal regulated rent.Respondent argues that the current legal regulated rent must be calculated, as a matter of law, from the last properly registered rent, specifically, $568.00 in 2001 prior to the unlawful increases. Decisional support for this method is distinguishable because there exist sufficient rent records in this case to determine the legal regulated rent. Compare Bradbury v. 342 West 30th Street Corp., 84 A.D.3d 681 (1st Dept. 2011), wherein the court calculated rent from the last properly registered rent after a trial and based upon trial evidence that the landlord had fabricated bills and invoices to justify unlawful rent increases.This court distinguishes cases cited by respondent that support reversion to the last properly registered rent. In Ernest & Maryanna Jeremias Family Partnership, LP v. Matas, 39 Misc.3d 1206(A)(Civ. Ct. Kings Cty. 2013), the court held a trial after which it found that landlord willfully overcharged respondent based on evidence of impermissible increases in the face of DHCR rent reduction orders. The trial court found that respondent failed to establish lack of wilfulness of the overcharge. In the case at bar, the determination as to whether there was an overcharge has not yet been determined. Matter of 3rd Ave. Realty Co. v. DHCR, 29 A.D.3d 332 (1st Dept. 2006) also involved disputed Individual Apartment Improvement (“IAI”) rent increases, specifically landlord’s challenge to DHCR’s finding of impermissible overcharges, and is therefore distinguishable.In Sheridan Props. LLC v. Liefshitz, 17 Misc.3d 1137(A)(Civ. Ct. Bx.Cty.), a trial was held on a non-payment case involving rent increase based on disputed IAI’s. After analysis of testimony and evidence, the trial court held that petitioner failed to meet its burden of establishing the existence of improvements to justify the rent increase and ruled in favor of respondent on her rent overcharge counterclaim. In calculating the legal regulated rent and overcharge award, the court added a 20 percent vacancy increase to the prior tenant’s rent, which was the last rent registered with DHCR. Again, the case at bar has not yet been tried and no allegations of IAI increases have been presented.Jazilek v. Abart Holdings. LLC, 72 A.D.3d 529 (1st Dept. 2010), also relied on by respondent, presents entirely unique and distinguishable fact pattern from that of the instant case. Jazilek involved an agreement between an alleged illegal subtenant (Jazilek) and landlord wherein the latter gave the former a 2-year lease with a lower preference than the registered rent. The alleged rent-stabilized sublessor, who had surrendered possession prior to the holdover, was paying $812.34 monthly rent. The last registered rent with DHCR was $812.34. Jazilek and the landlord signed the lease in 2002 for legal rent of $2200.00 but with a preference at $1800.00 per month. In February 2004, the landlord registered the prior tenant with monthly rent at $812.34. In March 2004, Jazilek signed a renewal lease at $2299.00 legal rent with a preferential rent of $1881.00 per month. Landlord then registered the apartment with DHCR in June 2004 at $2200.00 monthly rent in 2004. In 2005, Jazilek commenced a Supreme Court case challenging the rent and sought damages for wilful overcharge, alleging that the premises was wrongfully deregulated.The Appellate Division in Jazilek found wilful overcharge and that the apartment remained covered by rent stabilization and affirmed that the correct calculation is the prior legal regulated rent at $812.34 with 20 percent vacancy increase. The landlord clearly misrepresented to DHCR the rent charged and paid and took a baseless and exorbitant 270 percent increase and deregulated the premises. Moreover, the last correct legal regulated rent was only 4 years prior and no there were no intervening tenants. Therefore, no other correct legal regulated rent calculation method was feasible or logical than to revert to the last legal regulated rent registered with DCHR. The instant fact pattern bears no similarity to that in Jazilek and therefore reversion to the last properly registered rent of $568.00 is not appropriate on this dispositive motion.To address the remaining methods of determining the lawful regulated rent, this court distinguishes the holding in Thornton v. Baron, 5 N.Y.3d 175 (2005) that the default formula set forth in RSC §2522.6 must be used to calculate the correct legal regulated rent. Subdivision (a) of that statute states that “where the legal regulated rent or any fact necessary to the determination of the legal regulated rent…is in dispute between the owner and the tenant, or is on doubt, or not known, the DHCR….may issue an order in accordance with the applicable provisions of this Code determining the facts, including the legal regulated rent…” Thornton involved facts an elaborate illusory tenancy scheme wherein all parties had unclean hands. The record in this case is devoid of such facts, instead presenting a reliable rent history, at least as far as duration of each tenancy and actual vacancies are concerned.While this court notes that the registrations reflected incorrect rents since 2001, the leases, rent ledgers, and DHCR registrations annexed to both parties’ motions support a conclusion that there exists a reliable rent history at least as far as ability to determine vacancy and lease renewal increases using the $568.00 rent registered in 2001 as a launching point. The Supreme Court of this county recognized the availability of this remedy in Bernstein v. Diamond, 2018 N.Y.Slip.Op.31280(U)(Sup. Ct. N.Y.Cty. 2018. In that case, after making a summary determination that the premises were unlawfully deregulated and restore their rent-stabilized status, the court also determined that the record contained a reliable rent history, such as some, but not all, leases from the time of the original DHCR registration. The court held that the correct rent could be ascertained by applying all renewal and vacancy allowances supported by the record and that a hearing was required to set the correct rent and, if any, the overcharge amount.Given the availability of three mechanisms by which the court can set the legal regulated rent, to wit, reversion to the last legal regulated rent of $568.00, resort to the default formula, or relying on the rent history provided, summary judgment determination that application the first two formulae is required as a matter of law is inappropriate and reserves rent setting for the trial court.Respondent’s motion for summary judgment on her first and second counterclaims is denied. Pursuant to Rent Stabilization Law §26-516 (a), where an owner is found to have collected an overcharge above the rent authorized for a housing accommodation subject to rent stabilization, that owner shall be liable to the tenant for a penalty equal to three times the amount of such overcharge. See Champagne v. Piller, Case Number 505268/16, NYLJ Pg. 29; Vol. 259; No. 22 (Sup. Ct. Kings Cnty. 02/01/2018). As discussed above, as the legal regulated rent has yet to be determined, a finding of overcharge giving rise to a presumption of wilfulness is premature on the foregoing papers.Respondent’s motion to preclude petitioner from offering any new evidence than that which has already been submitted on either motion or opposition papers or in a discovery response is granted pursuant to CPLR §3126. One of the remedies for failure to respond to discovery is preclusion, and, given the fact that petitioner has provided the requested relief, to wit, leases and rental agreements, albeit not all that were requested, does not present the wilful and contumacious behavior contemplated by the statute for the relief of dismissal. 34-35 Corp. v. 1-10 Indus, Assoc., LLC, 36 A.D.3d 892 (2nd Dept. 2007). However, as discovery is complete and the case is trial-ready, petitioner is precluded from offering any leases or rental agreements, or testimony about same, at trial than that which he has already supplied in response to respondent’s demands. Foncette v. LA Express, 295 A.D.2d 471 (2nd Dept. 2002); Wei Hong Hu v. Sadiqi, 83 A.D.3d 820 (2nd Dept. 2011).Petitioner’s cross-motion to strike respondent’s affirmative defenses and counterclaims pursuant to RPAPL §745 is denied. Respondent alleges in her dated affidavit that she attempted to make the payments and followed petitioner’s instructions. Petitioner does not deny her allegations and therefore any delay in, or failure to make, payments is not the default contemplated by RPAPL §745.(Intentionally left blank)ConclusionFor the reasons stated above, respondents’ motion is for summary judgment finding rent overcharge is granted, petition is dismissed, and parties are directed to return to this court to address outstanding counterclaims. The record wants for development in this regard. Moreover, respondent’s counterclaims for an order to correct and a rent abatement, as well as reasonable attorneys’ fees, remain outstanding.All parties shall return to Kings County Housing Court, Part H, Room 507 on April 4, 2019 at 9:30 A.M. to schedule a trial on counterclaims and attorneys’ fees.This constitutes the decision and order of the court.Dated: March 4, 2019Brooklyn, New York
